SPH REIT's 4QFY14 (ending Aug 2014) income distributable to unit holders was S$34.9m, which translates to a DPU of 1.39 S-cents. This was 6.1% above the IPO forecast and we judge these numbers to be marginally above our expectations. The aggregate DPU of 5.99 S-cents from 24 Jul 2013 and 31 Aug 2014 was also 3.8% above IPO forecasts, and translates to an annualized yield of 5.1%, based on the last closing price of S$1.06.

Operational performance from both Paragon and The Clementi Mall remained firm over 4QFY14, both being fully leased and generating gross revenues in line with the IPO forecast. Paragon recorded positive rental reversions of 10.5% over the YTD period, while The Clementi Mall saw 5.5% positive reversions while retaining more than 90% of the tenants (by NLA) over FY14.

Though we have seen weakening visitor arrivals and retail sales in Singapore over 2Q-3Q14, management indicated that they remain confident of maintaining positive reversions ahead in FY15. The REIT is also going ahead with three AEIs at Paragon, which is expected to generate an estimated NLA of 10,000 sqft (to be phased in from FY16) and improve the operational efficiency of the mall. Maintain HOLD with unchanged fair value of S$0.99.

Source: OCBC Research - 14 Oct 2014